Silver Sales to Surge as Investors Seek Protection, Perth Mint Forecasts By Jason Scott - Nov 22, 2010 2:19 AM ET
Silver-coin sales will climb as investors seek to protect their wealth from weakening currencies, according to the Perth Mint, producer of about 6 percent of the world’s gold bullion.
“There seems to be more upside with silver than gold right now,” said Ron Currie, sales and marketing director. The mint, founded in 1899, also wants to sell more gold to China even as it scales back production rates from the peak levels seen last year after the 2008 financial crisis, Currie said.
The mint’s outlook adds to signs that global demand for silver, which trades for about 50 times less than gold per ounce, will increase. The Royal Canadian Mint said last week that silver-coin sales will jump more than 50 percent this year. The Perth Mint may match that gain, Currie said in an interview.
Some customers have moved gold holdings into silver, Currie said on Nov. 19. There are no fundamentals to the silver market “but people are buying it,” he said from the mint, which is controlled by the Western Australian government.
Immediate-delivery silver has surged 64 percent this year, peaking at $29.36 an ounce earlier this month, the highest price since September 1980. That’s beaten gold’s 24 percent jump in 2010. Gold traded at a record $1,424.60 an ounce on Nov. 9.
Silver may climb to more than $30 an ounce in 2011 on investment demand, London-based research firm GFMS Ltd. said in a report on Nov. 18. The Dollar Index, a gauge of the U.S. currency’s value, has dropped about 12 percent since reaching this year’s high on June 7 on concern that further bond purchases by the Federal Reserve will debase the currency.
‘Poor Man’s Gold’
In India, the world’s top gold consumer, there may be rising demand for silver, which has been “regarded for long as the ‘poor man’s gold’,” broker Karvy Comtrade Ltd. said in a note to clients on Nov. 2.
The Perth Mint’s Currie declined to give a total output figure for coins and bars, or the value of the bullion stored on behalf of buyers. Investors can opt to buy and store gold at the mint, or buy coins to hold themselves.
“We’re coming off the highs triggered by the global credit crisis back to a more normal production status,” said Currie. Since June, the mint has cut its employees to 250 from 300 and scrapped an overnight shift, Currie said.
“We won’t reach those highs again unless there’s another global crisis,” said Currie. “The last month has quietened down, with some customers selling back because the prices are so high.” The mint had doubled capacity and increased staff numbers by about 20 percent in the 18 months to June.
“China is a target market for us” for gold, Currie said. “Now there’s an opportunity to sell to the banks, because they have the ability to import gold, we’d like to feed that market. Delivering to the U.S. and Europe is potentially difficult for us, but China is much easier.”
Demand for gold in China, the world’s largest producer, may double in the next decade to as much as 900 metric tons a year as retail investment and jewelry sales increase, according to a forecast this month from the World Gold Council.
Western Australia gold production was valued at A$5 billion ($4.94 billion) in the year to June 30, 2009, according to state government figures. The mint, which processes all the gold mined in Australia as well as imports of scrap from overseas, introduced a web-based service last week allowing Australian customers to buy gold, Currie said.
“The global financial crisis caused a huge interest in precious metals,” Currie said. “Mums and dads were hedging their exposure to other investments,” he said. The website- purchase service will be expanded overseas after February.
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